An extremist, not a fanatic

June 28, 2007

How to manage talent

The Times has a supplement advising bosses on how to manage talent. It doesn't give the most important advice of all - the best way to manage talent is to find ways to do without it.The fact is that money flows to power. If your business is dependent upon talented performers, they've got you by the Davinas. They'll make money and you won't. This is why football clubs have for long been bad businesses. They suffer what Alan Sugar called the prune juice effect - money comes in and goes straight out to players. The question of who has what power is, therefore, central to thinking about companies, as the marvellous Luigi Zingales discusses here (pdf). The question for bosses, then, is: how to increase their power (and hence profits) by reducing reliance on talent. Ways in which this is done include:1. TV. Find formats that work without stars. If you make the Paul Daniels Show (God forbid) you need Paul Daniels and he'll hold you to ransom. If you make Big Brother or the X Factor, you can exploit wannabees. 2. Film. Use CGI and special effects rather than rely on stars. Shrek won't demand $50 million for a sequel, join the scientologists, lose his looks or get drunk and insult jews. CGI's expensive, but reliable.3. Media. Dumb down. Any idiot can root in Kate Moss's dustbin or write for CiF, so these journalists come cheap. Genuinely talented writers with specialist knowledge are more expensive (so I'm told.)4. Fund management. Use quant finance and trading rules, rather than "star" managers who use "judgment." Quant guys are usually (with exceptions) more fungible and less egotistic than stars.

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5. De-skill the workforce. Don't rely on scarce and therefore expensive expertise. This is happening throughout the public sector, for example the attempt in the NHS to tame the power of doctors by replacing them with nurses or trainees. AKA replacing professionalism with process

I have some peripheral input into radio. It wasn't until I hung around with a producer for a few days that I realised what 'talent' means. It's a resource, and the fact that it has a price means that it's not scarce.

"He's just talent - if he doesn't want to do it, we'll get some more."

Talent's a commodity. We pay it to turn up and learn its lines. It might get rich, but unless it vaults over the desk and starts producing stuff itself, it won't ever be in charge.

Maybe it would be usefull to distinguish between talent, which is relative, and expertise, which requires the acheivment of an absolute standard.
E.g there is no agreed standard for a premiership footballer, other than they have comparable talent to other premiership footballers. Whereas to acheive expert status, as, say a lawyer, one has to pass exams, join a chartered society, practice a certain number of years etc.

1. Use researchers: a PhD teaching studentship for your first years is a lot cheaper than using a professor.
2. Cut space: distance learners use their own homes, and don't have to gather in lecture theatres or seminar rooms.
3. Never use two modules when you can use one: 'Philosophy Football' needn't just be a cool T-shirt range; it covers the jocks and the brainiacs simultaneously.
4. Don't think: Supporting research costs money: far better to focus on teaching as many students as you can.
5. De-skill the workforce: use assesments a monkey (or a computer) can process.

"Film. Use CGI and special effects rather than rely on stars. Shrek won't demand $50 million for a sequel, join the scientologists, lose his looks or get drunk and insult jews. CGI's expensive, but reliable.
"

Except that film shows that the issue is not so much talent as idiocy. People who have studied film economics closely (the most recent crowd being Epagogix) have concluded that for most films the name stars are a small factor in the ultimate returns.

Where stars are valuable is wrt corporate in-fighting. The studio can make only a small number of films per year. When the choice has to be made as to which of two films to make, the decision, madde some corporate higher-up, is generally swayed by such considerations as "Well my movie already has Tom Cruise and Angelina Jolie signed up, and his movie has a cast of nobodies".

In other words, the internal decision-making process in these organizations is so broken (not least because these organizations are populated by people who are easily intoxicated by celebrity --- normal human beings would not put up with the indignities of the business and would become managers and execs in other industries) that the sort of rationality you are discussing just doesn't enter into the equation.

Epagogix is partnering with a number of hedge funds to make movies (aiming at the sweet spot of movies that make the most money relative to cost, rather than event blockbusters). It will be interesting to see how this turns out, both in terms of the quality of the movies, and the improvements in the economics that Epagogix promises.

I think you're mistaken in your section on film. CGI is perhaps marginally more reliable than a certain class of actor, but in fact the history of CGI is littered with films in which the animation has proved a significant stumbling block to audience empathy. What's more, you say Shrek doesn't charge $50 million a movie (no one does), but how much does Mike Myers charge for the voiceover?

The main triumph of the Industrial Age has been to move expertise from people into processes. Of course, it's not much fun if you're an interchangeable part, but that's economics for you.

Posted by: Meh | June 28, 2007 at 10:51 PM

Our finance director recently opined on this suibject at a gathering of all his accountants. His concern is that process was replacing professionalism. People were learning to follow a flow chart, box and arrow diagram, or whatever, rather than using their (expensively acquired and highly paid) professional judgment. This is fine until something something "exceptional" happens. I.e something outside the process, or when you are required to explain something to a non-expert. A "processor" can do nothing but describe the process, an expert can explain the problem in a wider context, compare it to other similar problems and give it some meaning in the context of the organisation.
It's like comparing an A level essay to a research dissertation - or a descriptive to an analytical answer.